- Prior 50.5
- Composite PMI 50.9 vs 51.0 prelim
- Prior 50.6
The readings reaffirm a slight improvement in euro area business activity in July but overall levels remain relatively subdued at best. The survey noted that the rate of increase in business activity remained sluggish and was weaker
than the survey average as stagnant demand held back output. France remains the notable weak link in all of this of course. HCOB notes that:
“This could turn out to be a good summer for service providers. In Italy and Spain, business activity rose more sharply in July
than in the previous month, while Germany, after several challenging months, has clawed its way back into growth territory.
The standout performer is Spain, where the Purchasing Managers’ Index jumped by more than three points—pointing to a
third quarter that’s off to an exceptionally strong start.
“France, by contrast, is the only one of the four major eurozone economies where the private services sector is contracting.
Worse still, the downturn deepened. One key factor is the government’s plan for sweeping budget cuts, which could weigh
heavily on economic growth. Speculation is mounting that the administration may face a vote of no confidence, adding to the
already high level of uncertainty. While Spain is stepping on the gas, France is firmly on the brakes.
“Employment in the eurozone’s services sector has been expanding uninterruptedly since February 2021. At first glance, this
might suggest a sector in robust health, but productivity – as measured by separate S&P Global PMI data – has been
declining since mid-2022, with only a brief pause around the turn of the year. This points to a troubling disconnect: even in
the age of digital business models, growth in the services sector is not translating into meaningful productivity gains. Given
that more than half of gross value added in the eurozone comes from services, this is a disquieting diagnosis.
“Inflation is easing in the eurozone’s services sector, increasing the likelihood of one further interest rate cut by the
European Central Bank in the second half of the year. Costs are rising at a pace that is the slowest in nine months and
below the long-term average
